High Income Child Benefit Charge

2024/25 update

What is the High Income Child Benefit Charge?

Child Benefit is a financial benefit provided by the UK government to parents or guardians responsible for raising children. It is paid to eligible families to help with the cost of raising children.

The High Income Child Benefit Charge is a tax-related policy that was introduced in 2013. Its main purpose is to recover some or all of the Child Benefit payments made to households where at least one member has a high income.

You may be impacted by the High Income Child Benefit Charge if:

• either you or your partners income is over
  • £50,000 up to 5th April 2024 or
  • £60,000 from 6th April 2024 **

and:

• you or your partner receive Child Benefit
• someone else receives Child Benefit for a child living with you and they contribute at least an equal amount towards the child’s upkeep

 

** the government announced changes to the High Income Child Benefit Charge from 6th April 2024 which we will outline in this article

 

 

What counts as income for the purposes of the High Income Child Benefit Charge?

This is where it can get slightly complicated as it is based on your ‘adjusted net income’ which is defined as your total taxable income before any allowances and not including things like Gift Aid.

You can use the HMRC Child Benefit tax calculator to get an estimate of your adjusted net income:

https://www.gov.uk/child-benefit-tax-calculator

If both your and your partner’s adjusted net income is over £50,000 up to 5th April 2024 or over £60,000 from 6th April 2024 then it is the responsibility of whoever has the higher income for paying the tax charge.

 

How is the High Income Child Benefit Charge calculated?

The government announced changes to the High Income Child Benefit Charge from 6th April 2024 which we outline below:

 

Old rules – up to 5th April 2024:

For every £100 that your adjusted net income exceeds £50,000 you have to repay 1% of the child benefit that has been received in the tax year.

This means that once your adjusted net income hits £60,000+ the entire child benefit is repaid.

The charge will never exceed the total Child Benefit received.

As an example, if your adjusted net income is £55,000 your High Income Child Benefit Charge would be 50% of the child benefit received in the tax year.

 

New rules – from 6th April 2024:

For every £200 that your adjusted net income exceeds £60,000 you have to repay 1% of the child benefit that has been received in the tax year.

This means that once your adjusted net income hits £80,000+ the entire child benefit is repaid.

The charge will never exceed the total Child Benefit received.

As an example, if your adjusted net income is £70,000 your High Income Child Benefit Charge would be 50% of the child benefit received in the tax year.

 

If you know that your adjusted net income is always going to be above the upper limit (£80,000+ from 6th April 2024) you could simply choose to opt out of receiving child benefit so you don’t have to deal with the High Income Child Benefit Charge, however if you do this you should still fill in the Child Benefit claim form and state on the form that you do not want to get payments – this is important as by filling in the form it means you will:

• get National Insurance credits, which count towards your State Pension
• get your child a National Insurance number without them having to apply for one – they’ll usually get the number before they turn 16 years old

In order to pay the High Income Child Benefit Charge you have to file a self assessment tax return each year – if you’re not already registered for self assessment you will need to register by 5th October following the tax year you need to pay the tax charge.

 

Proposal for future High Income Child Benefit Charge to be based on household income

At the Spring budget in March 2024 the government announced it’s intent to move to a High Income Child Benefit Charge system that would be based on household income rather than individual income by April 2026. The government will consult in due course on this change, however for the time being the system will continue to be based on individual income.

 

How can you help mitigate the impact of the High Income Child Benefit Charge?

A couple of options to consider to help reduce the impact of the charge is to make personal pension contributions or charitable donations. Either of these will push up the starting band by the level of gross contributions.

However this would only help you if it reduced your adjusted net income sufficiently to ensure that you were paying less of the High Income Child Benefit Charge than before.

 

Interest income and potential effect on child benefit

Interest income does count towards your adjusted net income (interest received within tax free wrappers e.g. ISA’s are not included) – with current interest rates being much higher than they were, this is likely to mean that some people who were not previously impacted by the High Income Child Benefit Charge will be affected going forwards, so it’s important to keep a close eye on your estimated total income throughout the year.

 

Please bear in mind that tax rules and thresholds do change – this article is based on the rules and guidance at the date of publication in March 2024.

 

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